Why I believe this 6% yielder could make you a fortune

Royston Wild reveals a brilliant yield hero that could make investors rich in the years ahead, and it’s not the only out there.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Record (LSE: REC) found itself trekking higher in Friday business following the release of bubbly third-quarter trading details.

The stock was trading 3% higher after news that assets under management equivalents (or AUME) swelled 4.4% during the final quarter of 2017, to stand at $63.9bn as of the close of December.

Record saw net client AUME flows boost the total by $1.4bn during October-December, while positive movements in financial markets bolstered aggregate AUME by a further $1.4bn. A $900m reverse attributed to adverse foreign exchange movements was not enough to take the shine off the results.

Celebrating the solid quarter four performance chief executive James Wood-Collins said: “This quarter saw further growth in AUME and in client numbers, with growth in particular from existing client mandates as well as new business.” The asset manager had 60 clients on its books at the close of the year versus 59 three months earlier.

And the Record head painted a positive picture looking ahead, commenting: “Volatility in currency markets linked to political and economic uncertainty continues to create opportunities for engagement with existing and potential clients on risk management, return-seeking and combined strategies.”

6% yields? Yes please

City analysts agree that there remain plenty of opportunities for Record to exploit looking ahead, and they have pencilled in earnings expansion of 7% and 6% in the years to March 2018 and 2019 respectively.

These forecasts leave the business dealing on a forward P/E ratio of 13.9 times too, great value under most circumstances but particularly so given Record’s exceptional momentum.

However, great profits growth is not the only thing that shareholders can look forward to as Record offers up market-mashing dividend yields too. This year a predicted 2.7p per share reward yields a large 6.3%. And the dial moves to 6.7% for next year thanks to an anticipated 2.9p dividend.

Build a fortune

Retirement property builder McCarthy & Stone (LSE: MCS) offers plenty for share pickers to sink their teeth into as well.

Possible changes to leasehold legislation in the UK to address the ground rent scandal is casting a cloud over the business right now. Having said that however, the City does not expect this to issue to stop earnings from galloping into the distance — far from it, in fact. Bottom-line rises of 16% and 23% are currently being forecast for the years to August 2018 and 2019.

Such predictions of rampant profits growth feed through to expectations of sprightly dividend growth as well. An anticipated reward of 5.5p for fiscal 2018 yields 3.8%, and a projected 6.4p dividend for the next period yields 4.4%.

What’s more, investors can put their faith in these estimates becoming reality, McCarthy & Stone’s dividend coverage standing at a bulky 2.9 times and 3.1 times for this year and next.

The Bournemouth business reported back in the autumn that forward sales were up 11% year-on-year as of November 10, at £277m, underlining the brilliant earnings possibilities afforded by the country’s ageing population. I reckon a forward P/E ratio of 9.1 times represents unmissable value, particularly as McCarthy & Stone is taking steps to supercharge  build rates to capitalise on this positive structural backcloth.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »

Investing Articles

£12K in savings? Here’s how I could turn that into £13K annual passive income

This Fool explains how investing a lump sum can help her build a passive income stream to enjoy in her…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s why Rolls-Royce shares are now set to fly over the £4 mark

Once again, Rolls-Royce shares are crushing the FTSE 100. Should I add to my holding of this stock at the…

Read more »